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NZD/USD slips as US PCE inflation prints slightly firmer
Headline PCE rose 3.7% year over year in July, marginally above the 3.6% expected, keeping the US dollar supported despite steady core inflation.
The New Zealand dollar weakened against the US dollar, with NZD/USD retreating to around 0.5940, down 0.6% on the day, after the latest US inflation data offered support to the Greenback, FXStreet reported. According to the Bureau of Economic Analysis, the Personal Consumption Expenditures, or PCE, Price Index increased 3.7% year over year in July, unchanged from June but slightly above the 3.6% expectation. On a monthly basis, the index rose 0.2%, while the core PCE Price Index stayed at 3.3% year over year, in line with forecasts, and also increased 0.2% month over month. FXStreet noted that the small upside surprise in headline inflation could reinforce expectations that the Federal Reserve may keep policy restrictive, although the reaction appeared limited because the core measure met expectations and the report did not look like it would meaningfully shift views for the September meeting. CME FedWatch indicated markets were pricing about a 36.0% chance of a Fed rate hike at the next meeting. Attention is now turning to Fed Chair Kevin Warsh’s speech at the Jackson Hole Economic Policy Symposium on Friday. On the New Zealand side, FXStreet said expectations call for a 25-basis-point rate hike from the Reserve Bank of New Zealand next week, which would lift borrowing costs to 3.0%, helping limit potential downside for NZD/USD even as the Fed outlook remains less certain.